This is a guest post from Tara Young.
After completing several hundred returns, the following recurring themes resonate with me in my journey towards financial independence:
Know yourself
Conventional Wisdom says that a large tax refund is a free loan to Uncle Sam and therefore bad news for the individual taxpayer. This logic doesn't compute for every individual.
Many taxpayers I help have a difficult time saving and are often tempted to spend any extra money they have on hand. In many instances, clients lament their inability to build an emergency fund, delay purchases for luxuries, or say no to friends and relatives who need a bail-out. For them, excess withholding is a forced savings vehicle that enables them to declare various purchases out of range and short-circuit loan requests.
There are interest-bearing savings choices out there, but it's more important to know your own situation and adapt your approach to saving accordingly.
Organization pays
Shoddy or incomplete record-keeping can mean missed opportunities. Each season, many clients miss out on deductions or credits because they don't have the proper documentation at hand.
Some folks are aware of the documents they need; they just forget or don't want to go to the trouble of keeping orderly records. Other clients have no idea the deductions/credits exist and scramble to collect the appropriate records before the filing deadline.
For example, how many times have we ended up paying full price on an item for which we have a coupon or discount code that we cannot locate? “Play good defense,” as Thomas Stanley and William Danko say in The Millionaire Next Door, so that you can keep more of your hard-earned money.
Invest in yourself
Invest in your education, your physical and mental health, and that of your family as well. The hardest stories I've heard revolve around folks who cut short their education or took poor care of their bodies and now struggle to make ends meet in dead-end jobs or government disability benefits.
As the primary breadwinner for my family, I'm familiar with the pressure to provide and put others first. However, one cannot provide for others if she cannot provide for herself. The US Census Bureau has reports on the correlation between educational attainment and income. [J.D.'s note: I've written before about the value of a college education.]
Quality trumps quantity
This is especially true for often-used or mission-critical equipment. The organization I volunteer with completed more than 4000 tax returns last year. Since we are required to provide a hard copy of the return to each taxpayer, and the average return runs 10 pages, we print about 40,000 sheets of paper in 3-1/2 months.
Churning 40,000 pages through two bargain-bin printers was not pretty. Forty-odd tax preparers lost time and productivity clearing paper jams, reprinting eaten pages, and coaxing print jobs to completion like something out of The Little Engine That Could. This year, we're getting spiffy new laser printers that are more suited to the workload. The upfront costs are higher, but the cost of ownership will be lower allowing us to better server our clients.
I started this volunteer journey knowing I'd learn a lot about taxes. I've learned a lot about myself and human nature as well. I'm looking forward to a good tax season.
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Read more about What Tax Season Taught Me About Personal Finance…
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